Singapore, Feb 13: Mounting criticism of Indonesia's plan to adopt a currency board system undermined Asian currencies on Friday as traders grew concerned that their doubts about the proposal would prove justified.US treasury secretary Robert Rubin repeated his reservations about the proposal and even the International Monetary Fund (IMF), which has so far avoided public comment, joined the growing voices of dissent. "We have concluded that a lot of options need to be in place before a currency board would make sense," IMF first deputy managing director Stanley Fischer said in Washington.
"The market's always been sceptical about it. Now they're worried that these people will pull out their funds," a US bank dealer in Singapore said.
"I don't think anybody wants to leave any open short dollar positions over the weekend. It's like Russian roulette," she said. "We have to be strapped in for another roller-coaster ride."
The rupiah lost more than 20 per cent in early trade, falling through the 9,000 perdollar level.
News of a meeting between president Suharto and senior IMF adviser Prabhakar Narvekar, after which Narvekar declined comment, and a postponed meeting between Suharto and Steve Hanke, the US economist and advocate of the currency board, did little to soothe nerves.
Signs that controversial research and technology minister Jusuf Habibie may be the country's new vice-president and a potential successor to Suharto added to the market's gloom.
"The market does not take Habibie well. When there were rumours that he'd be vice-president previously, the rupiah dropped immediately," the US bank dealer said.
"Now it seems quite certain that he will be and that's just a recipe for disaster," she added.
Indonesia's ruling Golkar party named parliamentary speaker Harmoko and Habibie as vice-presidential candidates on Thursday ahead of the March election. Elsewhere, the Malaysian ringgit touched a low of 4.00 to the dollar as offshore interbank players sought dollars amid worries about Indonesia andsliding Kuala Lumpur stocks.
The Singapore dollar fell below 1.67 to the US dollar and dealers said it would head back towards 1.75. The stock market lost nearly four per cent.The Thai baht fell through the 47.00 per dollar level as companies sought dollars and traders worries about Indonesia. Dealers said the prospect of Japanese creditors recalling parts of short-term loans they extended to the Thai private sector ahead of their book closing in March also hurt the baht. "Renewed buying from corporates, possibly linked to debt repayment to Japan ahead of book closings was a key factor for the fall. And Indonesia's unsettling problem also weighed on sentiment," a US bank dealer in Bangkok said.
News the IMF had decided to relax its fiscal target for Thailand, allowing a fiscal 1998 budget deficit equivalent to one to two per cent of gross domestic product, barely produced a twitch as it had been widely discounted.
Deputy prime minister Supachai Panitchpakdi said the IMF easing of Thailand's budgetarysurplus requirement would help prevent the economy from contracting this year.
The Philippine peso fell through its first volatility band at 41.502 per dollar in early trade, hit by weakness elsewhere. The Taiwan dollar opened below T$33 to the US dollar due to weakness in the yen and south-east Asian currencies, but traders said its fall would be limited to 33.10 as foreign funds continued to flow into the bullish stock market. The Hong Kong dollar softened and forwards extended their overnight gains.
The Seoul won was relatively steady as traders remained cautious despite the cancellation of a trade Union strike.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
